Hackett Group: Bank APIs are Cornerstone of Modern Treasury

FinLync | December 15, 2021

A new report published by treasury technology advisors from The Hackett Group predicts that bank APIs will be the cornerstone of treasury’s modern technology architecture. The report, Why Treasurers Should Care About Bank APIs, explains key findings, which solidify the business case for bank APIs in treasury.

Why do bank APIs matter?

Though bank APIs are not new, some treasury departments have been slow to adopt them, questioning whether real-time bank data visibility is the game changer it claims to be when it comes to liquidity management. Others assume integrating and managing multiple bank APIs will be complex and time consuming, eliminating the claimed value they bring to an organization.  Increasingly, a better understanding of the benefits of bank APIs, the emergence of a bank API data aggregator, and the maturation of finance’s overall digital vision are making these concerns a thing of the past.

Corporates using bank APIs quickly realize the business value — speed, optimization, security and cost efficacy. Operations become more efficient, funding becomes more actionable, timely and cost effective, and data security becomes airtight, reducing fraud risk.

Read the Hackett Group Report: Why Treasurers Should Care About Bank API

In addition, regulations such as the Revised Payments Services Directive (PSD2) are creating an environment ripe for innovation in areas like payments where real-time is ushering in a massive shift to real-time everything using bank APIs. That API environment is based on an underlying technology that frees banks and corporates from the restrictions inherent in operating on a legacy system, where even the slightest change to features or functions can have a widespread, sometimes damaging, effect on the system as a whole. With APIs, this real-time environment allows treasurers to create an agile, responsive direct relationship that intersects with the ERP and bank partners, without impacting the core technology and within the airtight security structures already in place for these systems.

Perhaps, most importantly for the CFO and Treasurer, the reality that treasury does not need to install new systems because bank APIs can be easily integrated into existing systems and set up for automated activities delivers one of its most potent benefits: true plug and play technology.

Peeling Back the Layers Surrounding Bank APIs

Bank APIs are altering the role of treasury in organizations to a more strategic function, by:

  • Changing the “push-pull” of staggered data synching typical with host-to-host and other third-party connections by creating a continuous information loop that translates data into action.
  • Increasing liquidity optimization benefits with real-time data, even when centralized mechanisms may already be in place like cash pools, in-house banks, or sweeps.
  • Significantly improving your treasury crisis-preparedness playbook to meet the challenges of a highly volatile market – as we have seen with the COVID 19 pandemic.
  • Providing your company with a competitive advantage to meet not only elevated user expectations but also by allowing you to hire and retain the talent needed for the treasury of tomorrow by using modern technologies like bank APIs.
  • Increasing the adoption of Open Banking standards that require banks to share customers’ financial information, with bank APIs offering a simplified way of safely connecting proprietary systems without heavy IT.
  • Maximizing machine learning-enabled apps due to the continuous data flow with real-time data and bank APIs.
  • Making treasury more agile in adjusting to changes in the company’s business model and financial ecosystem with APIs.
  • Creating a robust data platform, based on ERP-embedded apps and bank APIs, that increases the speed and efficiency of treasury and other related activities, to focus on more value-creating work, such as business partnering and analytics.
  • Providing the office of the CFO with never-before available data like the status of a payment, detailed payment tracking, and bank fees – all in real-time. No more stale data or best guesses. No more waiting for an acknowledgement for a critical M&A payment.

Read the Hackett Group Report: Why Treasurers Should Care About Bank API

What can you do with Bank APIs?

Once your organization connects to bank APIs, you can leverage them for a number of things including:

  • Minimize risk of fraud, increase security through end-to-end encryption
  • Real-time available balances
  • Instant, end-to-end payment tracking just like a package tracker
  • Greater transparency of bank fees
  • Faster issue resolution: same day, automatic reconciliation, automated alerts for exceptions, machine learning-assisted issue resolution
  • Reduces your need for IT resources: no more broken connections to repair, no waiting on IT to correct message structures
  • Deeper integration by providing direct connectivity, eliminating the limitations of legacy technology by embedding incoming multi-bank data directly into your system of record. 
  • Removes the barriers between the ERP and banks, opens new doors for analysis, and data harmonization reduces manual tasks, allowing treasury to focus on its core work.   

Though bank APIs and API aggregators will not supplant legacy connectivity methods overnight, the future is clear: bank APIs are quickly becoming a core component of the finance organization’s modern technology architecture.

Hackett Group report